Trump’s tariffs could reduce US deficit by $4 trillion, CBO estimates

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WASHINGTON (Reuters) -President Donald Trump’s increased tariffs on U.S. imports from foreign countries could reduce the national deficit by $4 trillion over the next decade, the Congressional Budget Office estimated on Friday.

If Trump’s global tariff hikes continue, increased revenue could shrink primary deficits by $3.3 trillion and cut federal interest payments by $0.7 trillion over the next decade, CBO, Congress’ nonpartisan analyst, said.

The current top tariff rates may not hold as negotiations with trading partners and international legal challenges are ongoing.

But the additional tariff revenue could help offset the deficit increases triggered by the Republicans’ tax-cut and spending bill passed this year. CBO estimated this would widen the deficit by $3.4 trillion over the next decade.

The U.S. federal debt is $37.18 trillion, according to the Treasury Department. It has continued to grow under Republican and Democratic administrations as the U.S. Congress continues to authorize the federal government to spend more money than it takes in.

Lawmakers face a government funding deadline at the end of September or risk a shutdown if spending bills are not passed.

The latest CBO estimate marks an increase from June when it forecast a $2.5 trillion reduction in primary deficits and a $500 billion cut in interest outlays.

U.S. tariff rates across countries and products averaged 16.7% in August, up from 15.1% in June, according to Oxford Economics. More than $26 billion in duties have been assessed by U.S. Customs and Border Protection this fiscal year, far surpassing the hundreds of millions recorded in the previous year, according to the analysis.

(Reporting by Bo Erickson; editing by Scott Malone and Clelia Oziel)